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Gildan plans U.S. expansion, to invest $200-million in new plants

Gildan products displayed at their annual general meeting in Montreal on January 31, 2008.

Christinne Muschi/The Globe and Mail

Gildan Activewear Inc. is ramping up its operations in the U.S. South with plans to invest more than $200-million (U.S.) in two additional yarn-spinning facilities.

The Montreal-based manufacturer of T-shirts, socks, underwear and sportswear says it is scouting locations for the construction of two plants, in addition to plans announced last year for a new ring-spun yarn manufacturing facility in Salisbury, N.C., as well as the upgrading of the company's operations in Clarkton, N.C., and Cedartown, Ga.

Gildan's investment in U.S. manufacturing comes several years after the company closed its high-cost apparel manufacturing in Canada and the U.S. and shipped work to lower-cost location in Central America and the Caribbean.

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The new facilities in the Southern United States will be state-of-the-art and low-cost, Gildan said in a news release Monday.

The company says it expects the investment of more than $200-million to take place during fiscal 2014 and 2015.

Locating the yarn-spinning facilities in the South makes sense because it is closer to supplies of cotton, company officials have said previously.

The company is also able to take advantage of the Central America Free Trade Agreement that allows for the duty-free importation of finished goods made from yarn spun in the U.S. or Central America.

Gildan said on Monday that its total investment in U.S. yarn-spinning operations is expected to create more than 700 jobs and strengthen the company's domestic U.S. component of its vertically-integrated manufacturing.

Desjardins Securities financial analyst Chase Bethel said in a research note Monday that the additional $200-million investment should provide "significant cost savings" by 2016 with the first full-year earnings impact likely in 2017.

"Gildan's management has a solid track record of investing in the company's asset base, and then leveraging improvements in product quality and reductions in its cost base to drive top-line growth. We see this announcement as a continuation of this strategy."

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